Connect with us

Global Banking and Finance Review is an online platform offering news, analysis, and opinion on the latest trends, developments, and innovations in the banking and finance industry worldwide. The platform covers a diverse range of topics, including banking, insurance, investment, wealth management, fintech, and regulatory issues. The website publishes news, press releases, opinion and advertorials on various financial organizations, products and services which are commissioned from various Companies, Organizations, PR agencies, Bloggers etc. These commissioned articles are commercial in nature. This is not to be considered as financial advice and should be considered only for information purposes. It does not reflect the views or opinion of our website and is not to be considered an endorsement or a recommendation. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third-party websites, affiliate sales networks, and to our advertising partners websites. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish advertised or sponsored articles or links, you may consider all articles or links hosted on our site as a commercial article placement. We will not be responsible for any loss you may suffer as a result of any omission or inaccuracy on the website. .

Investing

THE POUND IS POUNDED BUT INVESTORS URGED TO AVOID KNEE-JERK REACTIONS
THE POUND IS POUNDED BUT INVESTORS URGED TO AVOID KNEE-JERK REACTIONS

Published : , on

The pound might have been taking a pounding in recent days, but investors should avoid knee-jerk responses, warns a leading analyst at one of the world’s largest independent financial advisory organisations.

 Tom Elliott, International Investment Strategist at deVere Group, is speaking out following sterling’s nosedive of 6 per cent in two minutes in an overnight ‘flash crash’ late last week.  On Friday morning, at its nadir, the pound was being traded at $1.1841, which is its lowest since 1985.

 Mr Elliott observes: “Currency markets are reacting to three things.

 “First, the realisation that British Prime Minister, Theresa May, has opted for a risky ‘hard’ Brexit strategy.

 “Speeches at the Conservative Party conference last week suggested that the UK government will be willing to sacrifice membership of the single market, and possibly the E.U’s free trade area, in order to ‘take back control’ of immigration and end ‘meddling from Brussels’ on a range of issues.

 “A hard Brexit carries a much greater risk of economic dislocation as investment plans are put on hold by UK businesses, and by foreign ones considering investment in the UK, as they wait to see what tariffs and conditions will apply to UK/EU trade once the Brexit negotiations are completed. Consumer confidence may weaken, with purchases of big-ticket items put off if consumers fear a slowing economy and a rise in unemployment. A weaker economy usually is bad news for a currency.

 He continues: “Second, the UK runs the largest current account deficit in the developed world.

 “The UK current account deficit (which is the total of these) is -5.4% of GDP (£162bn). It is-2.6% for the U.S, and +3.2% for the eurozone. This means the UK relies on foreigners to buy their debt, equity, buildings, factories and so on to the tune of £162bn each year in order for the books to balance. There is a real risk that with slower growth and Brexit uncertainty increased, these inflows shrink. Then sterling must fall in order to bring the current account deficit and matching inflows into balance.”

 He goes on to say: “And third, there is the possibility of higher U.S. interest rates and possibly lower ones in Britain.

 “Interest rate trends currently favour the dollar over other currencies, as the Federal Reserve is clearly itching to raise rates. Slower growth in the UK as a result of a hard Brexit may lead to the Bank of England cutting interest rates again, down to zero.   A widening interest rate differential against the dollar will lead to a weaker pound, everything else being equal.”

 Mr Elliott concludes: “What should investors do? For the moment: Sit still and avoid knee-jerk responses. Recent economic data from the UK has been stronger than had been expected in the wake of the 23 June referendum. Doom and gloom forecasters may continue to be proved wrong as a hard Brexit is negotiated.”

Uma Rajagopal has been managing the posting of content for multiple platforms since 2021, including Global Banking & Finance Review, Asset Digest, Biz Dispatch, Blockchain Tribune, Business Express, Brands Journal, Companies Digest, Economy Standard, Entrepreneur Tribune, Finance Digest, Fintech Herald, Global Islamic Finance Magazine, International Releases, Online World News, Luxury Adviser, Palmbay Herald, Startup Observer, Technology Dispatch, Trading Herald, and Wealth Tribune. Her role ensures that content is published accurately and efficiently across these diverse publications.

Global Banking & Finance Review

 

Why waste money on news and opinions when you can access them for free?

Take advantage of our newsletter subscription and stay informed on the go!


By submitting this form, you are consenting to receive marketing emails from: . You can revoke your consent to receive emails at any time by using the SafeUnsubscribe® link, found at the bottom of every email. Emails are serviced by Constant Contact

Recent Post